The US Dollar Index (DXY) saw a slight retreat to 104.30 after an initial surge on Friday, propelled by a positive surprise in the Nonfarm Payrolls (NFP) report. Despite the robust labor market performance in March, which exceeded expectations, speculation about a potential rate cut from the Federal Reserve (Fed) in June remains prevalent.
The labor market displayed resilience, with the NFP report revealing an impressive increase of 303,000 jobs in March, surpassing the anticipated 200,000. However, February’s NFP figures were revised downward from 275,000 to 200,000. The Unemployment Rate experienced a marginal decline from 3.9% to 3.8%, while the Labor Force Participation Rate edged up from 62.5% to 62.7%. Average Hourly Earnings, an indicator of wage inflation, were adjusted down to 4.1%, aligning with market forecasts.
Although Fed officials are advocating for patience before considering rate adjustments, market sentiment still leans towards a 70% probability of a rate cut in June, with expectations of a cumulative easing of approximately 75 basis points throughout the year.
US Treasury yields are on the rise, with the 2-year yield at 4.70%, the 5-year yield at 4.35%, and the 10-year yield at 4.36%.
Technical analysis of the DXY suggests bullish momentum in the short term. Indicators such as the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) signal a positive bias, with the DXY positioned above key Simple Moving Averages (SMAs) – the 20, 100, and 200-day SMAs – indicating continued bullish sentiment among investors. As long as the DXY maintains its position above these levels, market participants are likely to remain optimistic about the dollar’s performance.
